RRSP Investment options can be utilized to its maximum benefits as per the guidelines of Canada Revenue Agency (CRA) apart from tax deferral and retirement savings. Being an educated Professional Real Estate investor would be able to get benefits many times over “ says Navtaj Chandhoke, founder, World Wealth Builders, a Canadian Institute for Real Estate investors and mentoring. You need to learn and keep yourself up to date to have maximum benefit from your RRSP”.
RRSP Investment Options
“Once you are familiar with how to put the RRSP work for you right now instead of after the age of sixty five, the rewards can be realized now and later” said Navtaj Chandhoke “Investing in yourself, your education will give you far better return than any other investment.”
There are two ways to borrow from your RRSP. First is through the RRSP Home Buyers Plan, for first-time home buyers, and second is through the Lifelong Learning Plan, for educational expenses.
The Lifelong Learning Plan (LLP) allows you to withdraw amounts from RRSPs to finance training or education for you or your spouse or common-law partner. You cannot use the RRSP funds to finance your children’s training or education, or the training or education of your spouse or common-law partner’s children.
You can make withdrawals from more than one RRSP as long as you are the annuitant (plan owner) of each RRSP. Your RRSP issuer will not withhold tax on these amounts. Although the maximum amount that you can withdraw is $20,000, there is an annual limit of $10,000. There is no limit on the number of times you can participate in the plan over your lifetime. Starting the year after you bring your balance to zero, you can participate in the LLP again and withdraw up to $20,000 over a new qualifying period.
The Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $25,000 (after January 27, 2009), from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability .
You are not considered a first-time home buyer if you or your spouse or common-law partner owned a home that you occupied as your principal place of residence during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal.
You have to meet this condition at the time you withdraw an amount from your RRSPs under the HBP.
However, if you are a person with a disability, or you are buying or building a home for a related person with a disability or helping such a person buy or build a home, you do not have to meet this condition. See HBP Condition – Person with a disability.
If at the time of the withdrawal you have a spouse or common-law partner, it is possible that only one of you will be considered a first-time home buyer.
These Canada Revenue Agency programs allow you to withdraw funds without a tax penalty. If you borrow outside these programs before retirement to pay for a trip or a car, the withdrawal is considered income in the year you received the funds and you’ll pay hefty taxes.
Check with Canada Revenue Agency for full details on both of these plans.
These plans make sense for some people, but there are drawbacks. First, when you take money out of your RRSP, you lose the power of compounded interest and re-invested returns on those funds. Money grows exponentially over time and when you reduce the money in your RRSP account, you earn less interest and sacrifice potential returns.
There are other pitfalls as well, make sure to research them all and realize the primary benefits of the plans are home ownership and education weigh the pros and cons to make an informed decision.